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Optimistic on Apple and Watching Oil Continue to Climb

Our optimism on Apple was at 57 split-adjusted. There was no reason to have been chasing it or basically any of the tech and chip stocks this year, but to ring the cash-register instead on virtually all over the overpriced ones, writes Gene Inger over the weekend.

Poising for a potent purgeseemed predictable over the past week for a number of probable reasons. Foremost was the technical extension that gave our belief resistance was significant at June S&P 500 (SPX) 2700-2720.

Also, it was notable they were trying to provide leadership primarily from a group of tired worn-out overpriced stocks that had assisted the delusionof a stronger market (on light volume), as was supported by strong Oil.

The Oil gains triggered a lot of short-covering (in Oil stocks and in Oil). I thought it was an irony after a nearly $30/bbl jump in WTI over the past months during which we were bullish, and it made no sense ahead of an OPEC meeting, where it was clear the Russians were unhappy so were pressuring the Saudis to cooperate with higher Russian production.

Along the way, we suggested Oil was essentially fully-priced for now with the $70 cap removed just to allow for geopolitically-related spikes.In this case,these events have not pushed Oil over that level.

My point was that we were bullish on dips for many months for Oil and for Oil stocks.And that worked great, while many fought the upward Oil trend for ridiculous reasons that don’t apply now.Alternative energy sources do matter but it will be years before they really hamper Oil.

I suspect at some point there will be less excessive oil exploration if the economics really shift in the direction of alternative energy.And that may ironically reduce newsupplies ofcrude, holding the price up, not down.

At the same time, U.S. shale oil drilling was assisted by Saudi keeping prices up a bit, while at the same time shale reservesare likely lower than are recognized.Flush production depletes faster than the optimists were suggesting (or the drilling program funding packages are based on) and that also may constrict supply down theroad.

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The other oversight so many made was with the excess technology price moves. It was not so much the story of the moment about chip supply or even of Apple (AAPL).

We discussed Friday the Apple/ARMS/Taiwan Semiconductor new 7 nm chip production delay of a month, which is what that's about.

That a slowing of sales exists is not really news, nor Q3 slowing. It’s Q4 that might again see slim inventory in the top model using the new processor, due to the delay in wafer production dates and early quantities.

We don’t dispute a slowing China market for Apple, identifying the cheap and in some ways at least a bit more useful but not better cellphone made by ZTE and others in China.

It’s mentioned frequently while suggesting that one sell some of their Apple holdings at or near historic recent highs.

Chinese and Indian customers often want a chat & payment app that is not available on an Apple phone, plus dual SIMS so that they have access to slower cellular services when in rural areas.

All that was suppressing Apple's business in Asia before trade concern.

Our optimism on Apple was at 57 split-adjusted. There was no reason to have been chasing it or basically any of the tech and chip stocks this year, but to ring the cash-register instead on virtually all over the overpriced ones.

Along with the overpriced market led by tech (FANG +) and Oils, you had rates starting one more time to sneakup. Pundits tried to argue lower rates based on a recession prospect. But somehow they thought that would levitate stock prices even more. Silly.

We don’t disagree about some risks, even that for a stagflation scenario.

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